Karl Marx published the first volume of Capital one hundred and fifty years ago. The writing of Capital was aimed at uncovering the operational laws of capitalism, as well as providing a theoretical weapon for the working class in its historical struggle for freedom and equality against the bourgeoisie. We have to remember that the main motivation behind this Herculean theoretical effort was not limited only to a realistic depiction of the conditions of the working class under capitalist accumulation, but to unearth the intrinsic elements of these iron laws in their sheer brutality.

If we are to read Capital once again hundred and fifty years after its publication, we ought to distinguish between Marx’s efforts to understand the logic of capital in its abstract form and his efforts concerning the realization of this logic in terms of class struggle. In other words, if we were to interpret Marx’s writings in a deterministic and mechanical fashion, we would not be able to understand the dynamics of the evolving “new international division of labor” between different countries, different geographies, and the new forms of capital and working classes.

***

Marta Harnecker, in her analysis of the Latin American experiences in The Bullet, takes this stance further. In Harnecker’s assessment, the devastation that had been inflicted by the neoliberal policies in Latin America is comparable to the days of terror and frustration in the Soviet Russia just at the brink of the imperialist war, i.e. WWI, 1913-1917. The collective imperialist assault on the indigenous economies of Latin America was indeed made possible via the neoliberal orthodoxy of the agencies of the Washington Consensus—the World Bank, the IMF, and then the WTO.

Conservative neoliberal policies that aimed at privatization, “flexibilization” of labor markets, and dissolution of the welfare state by commercializing public services like education, health, and social infrastructure had led in those countries to the collapse of the middle-income classes, increased poverty, increased inequality of the income distribution, deepened social fragmentation, and opened them up to brutal exploitation of national and global capital. The sheer, icy exploitation that Marx had investigated through his three volumes of Capital was vehement all through Latin America and elsewhere neoliberalism was dominant.

These Latin American countries had also been the venues of indigenous uprisings against neoliberal repression. Left populist movements in Chile, Argentina, Brazil, and Colombia gained popular support and brought their candidates to power one by one, beginning the turn of the century. What was critically distinguishing in many of these movements, however, was the fact that these uprisings often consisted of massive horizontal organizational structures, rather than being led by the industrial workers and /or their disciplined parties. Composed of university students, local indigenous peoples, peasantry and even clergy, this wide populist coalition had nevertheless succeeded in gearing its focus on a clear mandate: “End neoliberalism!” and “Another world is possible!”

A very important characteristic of this uprising was that the traditional industrial working class had a relatively weak leadership role cast for its organized cadres. “Class-based” claims were replaced by more general, and wide-ranging “national” and “local” demands. The core common ground of all these “objective” demands of the “masses” was their “urgency.” Neoliberalism had to be confronted and fought back, immediately.

***

A thorough analysis of the causes of the relatively weak role played by the traditional industrial working class organizations within the anti-neoliberal insurgence is clearly beyond the scope of this note. Yet, one can immediately point to the initial assault on the working class’ political parties, trade unions, and mass organizations, by neoliberal hegemons directly suppressing their rights via anti-democratic and even outright fascist tactics. Both the national and international capital centers were aware that the potential threat against neoliberal policies would first and foremost come from the organized working-class movements. Thus, they had taken early precautions to weaken these structures through anti-democratic forms of intervention against labor rights by way of privatizations and direct advances against trade unionism.

Aside from this, it has also to be noted that as capitalism unfolded towards the 21st century, a new international division of labor was also shaping the laws of accumulation and its institutions across the globe. As the underdeveloped, peripheral economies of the global South were brought into “emerging market” status one by one, these were abruptly turned into sweatshops together with marginalized conditions of work hosting fragmented, unorganized, and informal laboring masses. The fragmented and heterogeneous character of “wage labor” was the direct outcome of 21st century capitalism, ultimately because capital itself was fragmented and heterogeneous (in the wide variety forms of off-shore ventures, sub-contracting, etc.).

In addition to these developments, we should also underline a particular new opportunity provided by the neoliberal project to the working masses: the expansion of the consumption basket. As the services of the welfare state were being dismantled and poverty had deepened, laborers embraced a new opportunity as global consumers. Household credit instruments, private debt instruments, and all similar forms of this “buy now, pay later” world, had created an imaginarium for the workers wherein they could realize patterns of consumption beyond their dreams, as well as a pacifying way of “assimilation to the system”. This hyper-consumption opportunity was clearly a direct consequence of financialization of capitalism, and served for conditioning of the working class to harmonize its hopes of the future with the capitalist system.

We need to read Capital yet again; however, without falling into ready-made solutions covering standardized answers to standardized questions, and not by falling into the seductive traps of dogmas and easy narratives. We ought to read it for the purpose of understanding its inherent revolutionary dialectic both to understand and change the world…

The long-awaited move is finally on the loose: The U.S. Federal Reserve (the “Fed”) had shown its intensions to start raising its policy interest rates for the first time since 2008. The “federal funds rate” has been increased by 0.25 to 0.50 percent in December 2015, with hints of further hikes coming in 2016. Just to put this decision in historical perspective, let’s just point out that this rate was on the order of 5.9% over 1971-2015, and climbed as high as 20% in 1980.

The decision to increase the interest rate came after three episodes of unprecedented monetary expansion over the last four years. The Fed had amassed–under the program dubbed with the esoteric name of “quantitative easing”—a total of 3 trillion dollars worth of assets from the finance markets, equivalent to roughly 20% of U.S. GDP.

Earlier this year, in a separate Triple Crisis blog on the Bretton Woods After 70 Years, I shared the outcomes of this massive expansion in liquidity: Interest rates fell all around the globe to virtually zero, but with barely a dent in the real sector. Unemployment barely fell to the pre-recent levels, and gross domestic product in U.S. and elsewhere remained stagnant.

The figure below, borrowed from that earlier piece, summarizes those developments.

Source: US. Bureau of Economic Analysis

The obvious conclusion is that, in the absence of an effective real rise of investment demand, the expansion of monetary base and the collapse of the interest rates have had a negligible effect on the GDP performance. That means that the instruments of monetary policy were virtually powerless in lifting up the U.S. and global economies from the Great Recession.

But then what else does this move imply for the global economy, especially for the developing world?

First of all, let’s recall that the main mechanism of adjustment of the expansion of liquidity globally was severe appreciation of the domestic currencies in the developing world (or “emerging markets,” in the new jargon). This was, no doubt, a direct outcome of the increased hot money inflows into the region. As a consequence, import demands of these countries had exploded and led to current account deficits with intensified external indebtedness.

In Figure 2 below, we can follow the rise of the external indebtedness in the emerging markets. The breakdown of debt shows very clearly an ongoing pattern of growing non-financial corporate debt. The public-sector debt burden, on the other hand, fell as a percentage of GDP, while the private non-financial corporate sector foreign debt has approached 90% of GDP.

The rising foreign indebtedness as a ratio to gross domestic product had been of the key leading indicators of instability and deteriorating macroeconomic fundamentals.

The announcement of the increase in the Fed’s interest rates very clearly signal the end of an era of cheap sources of foreign finance. The foreign-debt-driven, speculative-led growth has come to an end. The show is over.

The G20 Summit has met, convened, and dispersed for the next year after a massive show in the tourist heart of Turkey, Antalya. The meetings had convened under the shadow of massive social exclusion and terror overrunning the global political economy. the G20 communiqué that had been released on November 15 was little more than a simple wish-list for a stable and participatory global economy—the main motto of Turkey’s presidency over 2015.

But to billions of working families across the globe, there was more than the standard wish-list of the G20 communiqué: the Labour20 (L20). The L20 was founded by the International Trade Union Confederation (ITUC) and the OECD’s Trade Union Advisory Committee (TUAC) and was convened with the call coming from Turkish hosts, the Confederation of Turkish Trade Unions (Türk-Iş), Confederation of Progressive Trade Unions of Turkey (DISK), and Confederation of Turkish Right Trade Unions (Hak-Iş).

The call of L20 came, at a historical moment of the heightening of the global crisis, with appeals to:

Move away from austerity policies, with their negative spill-over effects, and instead support for aggregate demand, investment, skills and innovation, public services, and progressive tax and redistributive systems.

Reduce income inequality and informality as major drags on growth and social well-being. Raise low and middle incomes through living minimum wages and by supporting collective bargaining and, in doing so, injecting purchasing power into economies.

Adopt the G20 Policy Priorities on Labour Income Share and Inequalities, and implement them at the national level including by strengthening labour market institutions, setting minimum wages, promoting the coverage of collective agreements and universal social protection, and integrating vulnerable groups into the formal economy.

Pursue further work on financial reforms, including internationally harmonised measures to shield retail banking from volatile trading and investment banking activities, and consider a financial transaction tax (FTT).

Raise and set targets for public infrastructure investment (physical and social) by at least 1% of GDP across the G20 as the primary route to growth and employment recovery.

Link investment plans to the creation of clean energy and green jobs.

Protect public services, ensure full financial transparency over risk arrangements, and grant leadership to independent public auditors. Greater labour law “flexibility” is not the right approach to promote PPPs.

Recognise the finance gap to achieving a just transition to a low carbon economy and spur investments into climate-friendly infrastructure and energy, while ensuring transparency of climate finance flows.

Commit to energy efficiency and renewable energy targets, including initiatives for training workers in these sectors.

Put in place Just Transition strategies for workers, companies, and regions depending on the fossil fuel value chain, and include trade unions in their design.

Promote social upgrading in supply chains and ensure that international labour standards and human rights are applied by G20 companies, including the UN Guiding Principles, ILO conventions, and OECD Guidelines for Multinational Enterprises. Strengthen the rule of law with cross-border legislation that mandates due diligence.

Strengthen workers’ rights and social protection systems, and introduce social protection floors to support the transition from the informal economy in developing and middle-income countries.

Ensure follow-up to the “integrated and comprehensive policy approach to foster strong, sustainable and inclusive growth … to tackle inequalities, promote inclusiveness and strengthen the links between employment and growth … with corresponding efforts in other work streams” as outlined in the “Ankara Declaration” of G20 Labour and Employment Ministers.

According to ILO data, open unemployment has reached to 200 million worldwide.

Under the pressures of the unemployment threat, more than 900 million workers are trapped in labour activities with less than $2 of income per day. ILO data reveal that most of these workers are young women and children.

Over 5 billion people on our planet lack social security protection and basic health services.

Despite all this evidence, the global economy has now entered a phase with the lowest fixed investment as a share of income. While the scarce resources of the global economy are being wasted at the speculation games of the global casino, the future of our planet’s well-being is increasingly put at risk from climate change driven by carbon dioxide emissions and urban pollution.

What could have been more important than these facts to be articulated at the Antalya meetings of the G20?

Global finance centers have been holding their breath for almost a year by now: will the U.S. Federal Reserve (the “Fed”) finally start “tapering” off from its monetary expansion programs, known as quantitative easing (QE)? By way of three QE operations, the Fed had amassed a total of $3 trillion worth of assets from the financial markets over a course of less than four years. This was equal to roughly 20% of U.S. GDP. In turn, interest rates fell all around the globe to virtually zero. While short-term low-risk interest rates in the United States fell to zero, interest rates in some countries remained much higher, so large interest rate spreads emerged between the United States and other countries. Notable “carry trade” emerged, for this reason, between the U.S. and Brazil; and yet, unemployment only slowly fell back to the pre-recession period, despite the fact that the labor force participation rate declined sharply to its 1970s level.

Now, seeing the expansion of the monetary base barely made a dent in stimulating real productive activity (see my January 2015 Triple Crisis blog post), the Fed declared in early Spring that “from now on it will be patiently waiting to start raising its policy interest rate and quitting QE operations.” This means bad news for global finance capital, which was drugged with the inflow of cheap liquidity, with zero credit costs.

Now that the financial smoke is clearing, we are in a better position to see the real costs of public programs aimed of stimulating employment and real activity.

As a response to rising global unemployment during the Great Recession, many countries introduced direct and indirect incentive packages to cover labor costs. These often took the form of reducing and covering the employer share of social security taxes, tax breaks, publicly financed reduced-hours programs, and other public support programs. The costs of these employment subsidies were measured in multi billions dollars, and yet their beneficiaries had been mostly big corporations such as McDonalds and Walmart, which already profited handsomely from low wages. In return, employment gains had been meager at best, while the subsidy costs were borne by the public sector.

The needy are not necessarily unemployed, or marginally employed in the informal sector. Ken Jacobs, chair of the U.C. Berkeley Center for Labor Research and Education, reports, for instance, that over the course of the Great Recession, public support for working families accounted for 52% of state spending on health and cash assistance. Accordingly, public support programs to compensate for the low wages of workers in the formal corporate sector cost as much as $153 billion a year to American taxpayers. Among the needy are those employed in home care and service sectors, where 48% of all workers rely on public assistance—food stamps, Medicaid, and other forms of support. Jacobs reports that this extends even to some of the most educated people in the United States: a quarter of part-time faculty at colleges and universities are in need of public support.

Similar employment-subsidy programs were enacted in all over the globe. Turkey, situated at the periphery of the global value chains, introduced a complex web of employment subsidies at a cost of US$7.5 billions a year, or about 1% of its GDP. Data reveal that while these programs sponged as much as 3% of total fiscal expenditures, with a meager return of only 0.1% of additional employment. The real gainers were large enterprises in the formal sector. Low wages were sustained by public support programs, as real costs were taken over by the public sector.

The U.C. Berkeley Report further corroborates the now well-known finding that from 2003-2013, inflation-adjusted wages fell for the entire bottom 70% of the U.S. workforce. As the global crisis lingers on and has given way to a period of stagnation, and the Fed is preparing for “victory” over its QE operations, it is becoming more and more clear for the working class that the gradual growth in employment does not necessarily mean growth in wages.

As we are about to wrap up 2014, it may prove worthwhile to celebrate the 70th anniversary of one of the most innovative and exciting episodes of homo economicus: The Bretton Woods Monetary Conference. Convened in 1944 at the Mount Washington Hotel in New Hampshire, the conference established the World Bank and the IMF (later referred to as the “Bretton Woods Institutions”) and set the gold standard at $35.00 an ounce with fixed rates of exchange to the U.S. dollar.

Based on John Maynard Keynes’s famous dictum, “let finance be a national matter,” and on the productivity advances of Fordist technology and institutional structures, the global economy expanded at a fast rate over the postwar era, from 1950 to the mid-1970s. Per capita global output increased by 2.9% per year over this period, which later came to be referred to as the “Golden Age of capitalism.” (In contrast, the average rate of per capita growth over the whole century has been estimated at 1.6%.)

The conditions that created the Golden Age were exhausted by the late 1960s, however, as industrial profit rates started to decline in the United States and continental Europe due to increased competition, particularly from the Asian “tigers” or “dragons” (Republic of Korea, Taiwan, Hong Kong, and Singapore). In the meantime, Western banks were severely constrained in their ability to recycle the massive petro-dollar funds and the domestic savings of the newly emerging baby-boomer generation. Trumpets for the “end financial repression” intensified with the so-called McKinnon-Shaw-Fama hypotheses of financial deregulation and efficient markets. A global process of financialization was commenced, lifting its logic of short-termism, liquidity, flexibility, and immense capital mobility over objectives of long-term industrialization, sustainable development, and poverty alleviation with social-welfare driven states.

A number of researchers (e.g., Acemoglu 2009; Stiglitz 2011; Epstein 2005) and a series of reports set from UNCTAD had long warned against the dangers of excessive financialization and deregulation.

Under the new financialized capitalism, loanable funds are increasingly diverted away from the real sphere of the economic activity and towards speculative finance. The global economy has grown too slowly and allocated too small a portion of its scarce savings into physical fixed investments that would enhance employment and generate incomes for the working poor. An ever-increasing portion of global profits are now generated from speculative finance, rather than productive activities. According to ILO’s estimates in the World of Labor Reports, financial profits currently constitute almost 50% of aggregate profits. This ratio was only a quarter in the early 1980s. As accumulation patterns diverged away from industry towards speculative finance, employment faltered and the global economy entered a phase of “casino capitalism” with international productivity gaps being maintained due to structurally persistent differences in physical infrastructure and human capital.

We know where this story led. As the speculative bubbles of finance erupted in 2008, a real-sector crisis developed that would lead to what has been called the Great Recession. Output declined in 2009, for the world as a whole, for the first time since the 1930 crash. Some 20 million people were added to the reserve army of the unemployed, bringing the total to above 200 million, or 7% of the global labor force.

The main policy intervention in response to the crisis—monetary expansion—was again based on the conventional recipes of the Bretton Woods system. Under a policy referred to for public relations reasons by the esoteric name of “quantitative easing,” the U.S. Federal Reserve (the “Fed”) amassed a total of $3 trillion worth of assets from the finance markets. This equaled roughly 20% of U.S. GDP. In turn, interest rates fell all around the globe to virtually zero; yet unemployment barely fell to the pre-recession levels despite the fact that labor-force participation rate was reduced sharply to its 1970s level

These large monetary interventions barely made a dent in the real sector, with GDP in U.S. and elsewhere remaining stagnant throughout the Great Recession. The figure below summarizes these developments.

Source: US. Bureau of Economic Analysis

The figure illustrates, vividly, the most decisive example of the “end of history”—monetary history, that is. The dramatic expansion of the monetary base and the equally dramatic collapse of interest rates are clear. Everything works in textbook fashion up to that point. But the effect in terms of real output is overwhelmed by the conditions of the Great Recession. In the absence of an effective real rise of investment demand, the expansion of monetary base and the collapse of the interest rates have had a negligible effect on GDP. That means that the instruments of monetary policy are virtually powerless.

A. Erinç Yeldan, a regular Triple Crisis contributor, is Professor of Economics at the Bilkent University, Ankara. He holds a PhD from the University of Minnesota, and is one of the Executive Committee members of the International Development Economics Associates, IDEAs.

The above title is from the article “We Need System change to stop climate Change” from The Bullet, the online newsletter of the Socialist Project (Toronto, Canada). The call to “change the system” was made following UN Secretary General Ban-ki Moon’s initiation of a summit—to draw attention to the threat of global climate change—in late September.

The call was already resonated by similar pleas, in particular by the global labor movement. IndustriALL Global Union declared in May 2014, for instance, that “there will be no jobs on a dead planet.” “The same people that try to avoid action on climate change have repressed workers for decades,” the union continued. “A Just Transition into greener jobs is the key to unlock the door to a sustainable future.”

It is estimated that, since the industrial revolution, the surface temperature of our planet has increased by an average of 1.5 to 2.2°C. This is attributed mostly to the concentration of the CO2 and other greenhouse gases in the Earth’s atmosphere. World Wildlife Fund (WWF) warns that life forms on our planet can tolerate only up to an additional increase of 2°C until the end of the current century.

Environmental scientists argue that in order to counter these threats, concentrations of CO2 should be limited to 450 ppm (parts per million) in our planet’s atmosphere. Estimates vary, but it is generally agreed that, prior to the industrial revolution, CO2 concentrations were on the order of 220 ppm.

In the event that these limits are breached, our planet’s climate will likely undergo a severe change, with sea levels rising and many harmful bacteria be spreading out with direct adverse consequences to at least 14% of the population of the developing world. With further adverse implications to productivity growth, it is estimated that costs of climate change will reach up to $25 trillion (one-third of the current level of the aggregate global value added).

In fact, let’s talk a little bit more in the language that capital will listen to: a recent ILO (International Labour Organization) report indicates that “the current resource-intensive development model of the past will lead to rising costs, loss of productivity and disruption of economic activity.” As a result of “the economic damages due to environmental degradation and loss of basic ecosystem services … productivity levels in 2030 would be 2.4% lower than today, and 7.2% lower by 2050.”

In a similar vein, OECD estimates caution that, mostly as a result of the adverse conditions due to climate change, productivity losses in the Asian economies through 2060 will reach 5%, and to 4% for the developing world as a whole. As a result, global consumption demand will recede by 14%.

In addition to the threat of climate change, global capital’s unrestrained quest for profit at all costs further reveals itself in widening poverty, the rise of the “informal” sector, and deterioration of incomes of the working masses. According to ILO’s data, 457 million workers (about a third of the global labor force) live under conditions of poverty, with a daily income of less than $2. Almost half are employed under “vulnerable conditions.” In addition, 5.1 billion people on our planet live without any social security coverage. Global capitalism is creating and re-creating conditions for poverty and environmental degradation with serious threats to the social and natural well-being of our planet.

One final comment from the OECD study: According to the researchers, today’s advanced economies are already experiencing a dramatic slowing of productivity growth. By the 2060s, the late-comers to industrialization will likely suffer from the same fate. Thus, the 21st century might just be witnessing the very last crisis of capitalism.

As the recession in Europe painfully proves all attempts at austerity to be dead-ends, the search for the miraculous “silver-bullet” continues. The European Central Bank (ECB) has initiated a negative “nominal” interest rate. That means the ECB, the first monetary authority to ever take such an action in a common currency zone, will be charging commercial banks for the funds they deposit (overnight) rather than paying them interest.

The ECB is pursuing an inflation target of 2% with a dogmatic belief that “this is he rate at which agents [read this as financial speculators and the rentiers] will not be affected in their economic decisions.” To this end, it utilizes three sets of interest rates: (1) the marginal overnight borrowing rate of the banks from the ECB; (2) the basic rate for their re-financing operations; and (3) the rate that is applied to the banks’ deposits at the ECB. In order for the monetary interventions of the ECB to have any effect, the rates on these interests ought to be differentiated. Until very recently, the ECB rate on deposits was set to zero, and the rate on the re-financing operations was 0.25%. The decision of the ECB has now been to reduce the latter rate to 0.15% and the deposit to negative 0.10%. The textbook explanation for this unusual negative interest rate on money deposited by banks rests on the expectation that they should be now motivated to lend their funds instead of keeping them in reserves. Hopefully, this will restore eurozone economic growth by encouraging more lending for “real” investment.

More growth certainly is needed. GDP growth for the zone as a whole was a fragile 0.9% (year-on-year) in the first quarter of 2014 and the IMF forecasts the eurozone’s full-year growth at 1.2%, compared with 2.8% for the United States and 2.9% for the UK. Nevertheless, these observations had not inhibited the storytellers of this epic of austerity. Many now argue that, now that Europe has attained the pre-recession (2007) levels of economic output, it is time to declare victory and pull out. Yet, this post-Vietnam syndrome approach fails to ensure that the European Union as a whole is on an expanding course out of the Great Recession. In fact, deflation continues to be a structural feature of the eurozone’s incurable malaise. With investment expenditures staying rock bottom compared to historical standards, firms are desperately cutting prices to boost their sales. Households, confronted with the ongoing austerity measures, are squeezing their consumption expenditures within a low-demand, low growth—nasty—equilibrium.

Meanwhile, the “developed world” is neither saving nor investing. As the two graphs below reveal, the developed economies of the globe seem to have shunned the accumulation of real capital, in favor of the debt-driven speculative games of the global casino.

Source: IMF World Economic Outlook, April 2014

Source: IMF World Economic Outlook, April 2014

But now, another fact comes into play: nominal wage growth rates have started to surpass inflation rates. The Office of National Statistics (ONS) of the UK reports that earnings growth in Britain has risen to match inflation for the first time since 2010, ending a squeeze in wages. Wages (including bonuses) in the UK grew by 1.7% in the first quarter of this year, compared with a year earlier. The annual rate of inflation in March was 1.6% (CPI). Wage growth had been consistently outpaced by inflation since 2008, meaning that the real pay for the average worker had been reduced by as much as 10% over the course of the global crisis. In fact, as Stockhammer notes, wage growth has stalled in most of the European countries before the crisis, and real wages have been falling since.

The fear of wage growth comes from a dogmatic belief that for gaining competitive edge in global production real wages have to be squeezed. The European strategy had long been one of a dogmatic attempt to secure a competitive edge based on wage restraint. And now, with the unavoidable rise in real wages, the dictum of austerity sets in once again with calls for further monetary rules to combat this danger.

Unfortunately, this dogmatic view continues to direct policy action despite overwhelming evidence that the European economy overall is wage-led and that consumption propensities out of wages are higher than those out of profits. Under these conditions, a strategy of fiscal-driven, wage led-growth would in fact prove to be superior than the austerity-calling trumpets of financial speculation. Any calls for that?

One of the greatest work-crimes in mining industry occurred in Soma, a little mining village in Western Turkey. At noon-time on Tuesday, May 13, according to witnesses, an electrical fault triggered a transformer to explode causing a large fire in the mine, releasing carbon monoxide and gaseous fumes. (The official cause of the “accident” was still unknown, at this writing, after nearly 30 hours.) Around 800 miners were trapped 2 km underground and 4 km from the exit. At this point, the death toll has already reached 245, with reports of another 100 workers remaining in the mine, yet unreached.

Turkey has possibly the worst safety record in terms of mining accidents and explosions in Europe and the third worst in the world. Since the right-wing Justice and Development Party (AKP) assumed power in 2002, and up to 2011, a 40% increase in work-related accidents has been reported. The death toll from these accidents reached more than 11,000.

Many analysts agree that what lies behind these tragic events is the unregulated and poorly supervised attempts of a corrupt ruling government to push through hasty privatizations and a forced informalization of labour. The Soma mine itself was privatized in 2005. In the heyday of an anti-public sector campaign, the new owners of the plant proudly declared a decline in production costs from the US$120-130 range under the public ownership of State Coal Inc. (TTK) to US$23.80. It was not very long before it became clear that what actually facilitated this ‘miraculous market success’ was the determined evasion of safety standards. On that front, the president of the private company Soma Inc., Mr. Gürkan, was heard boasting, “You can ask ‘what changed in the mine?’ The answer is ‘nothing.’ We simply introduced methods of the private sector only.”

Over this process of “introduction of the methods of the private sector,” average gross daily pay of the miners hovered at 47 TL (approximately US$20), while the existing mine tunnels were extended from 350 m to more than 2.5 km. The dissolution of the Council of Public Inspectionby government decree in 2011 was clearly instrumental in reducing the role of formal inspections to no more than friendly visits to the company headquarters, with no attention paid to the actual working conditions in the tunnels.

The tragedy is now referred to not as a “working accident,” but the crime of the century not only by Turks but also by the workers abroad. Mining workers in Bolivia, Cuba, and Venezuela had already shown solidarity by declaring one full day of work leave. In contrast, the half-hearted and tone-deaf speech of Prime Minister Erdogan nearly one full day after the fact, comparing the tragedy to the mining accidents in England and United States in the late 19th century—arguing that “mine accidents are normal globally”—sparked a wave of protests and clashes all over the country.

Despite all this local detail, one should not miss the global aspects of the Soma crimes. For what lies behind this ‘market-does everything better’ approach is the ongoing process of uneven globalization subjugating indigenous peoples of the world to the dictates of global value chains and the corporate profit motive. A recent report released by the Ankara-based think-tank TEPAV reveals, for instance, that deaths per million metric tonnes of coal mined are 7.2 in Turkey, in comparison to 1.27 in China, and 0.04 in the United States. Within Turkey itself, this ratio is reported at 4.41 in the public-owned plants of the TTK, in contrast to the private-sector average of 11.50.

With twelve sub-contracting firms engaged in Soma, the tragedy is a clear manifestation of peripheral “third-world” capitalism at its best, as the most polluting and hazardous industries are being shipped to the global sweatshops with poor regulation and fragmented, informalized working conditions.

The concept of the “middle-income trap” had been brought into fashion by Barry Eichengreen and colleagues (see their recent NBER Working Paper). The concept is used to describe the challenges, for countries with GDP per capita of around $16,000 (at 2005 prices), in achieving productivity growth and key institutional transformations.

Many economists have taken note of the fact that, as economies converge to this middle-income level, “easily-accessible” sources of growth based on the transfer of virtually unlimited supplies of labor from rural agriculture to urban centers and towards capital-investment-led high profit sectors gradually lose their stimulating impact. Technologies grow mature and finally become worn out. After this threshold is reached, sources of growth must be derived from technological and institutional advances and productivity gains, which can only be achieved by investments in human capital, research and development (R&D), and institutional reforms. This, however, is no easy task, and countries often get “trapped” at this stage of development, hence the middle-income trap.

Yet, as such, the middle-income trap is an average concept defined by national boundaries. Recent work reveals, however, that divergences persist, and often times are reinforced, between regions embedded within national economies and even within municipalities. In many instances, poverty-stricken regions co-exist side by side with rich and highly productive regions. The persistent co-existence of such divergent structures leads us to ask whether poverty is in fact being reproduced by the workings of the market mechanism favoring high-income regions. This observation has its roots in a long tradition in development economics of duality and dependency theories.

My recent study with several colleagues (Yeldan, et.al. (2013)) recognizes, for instance, that Turkey reached middle-income status in 1955 and has remained there for an excessively long period. In the fifty years through 2005, Turkey only graduated to the high middle-income status. Yet Yeldan et.al. ask “which Turkey?” and report that Turkish overall gross domestic product is in fact divided into three sub-divisions by income brackets:

With a regional income of $376 billion, exceeding those of European economies such as Norway and Switzerland, the high-income Turkey led by Istanbul and Ankara gives the impression of relatively powerful dynamics for escaping the middle-income trap. This sub-division hosts Turkey’s administrative, political, commercial and financial power centers and yet its links with the rest of Turkey are weakening gradually.

Apart from the “high-income Turkey,” there are two more sub-divisions: the one which is exposed to the danger of being trapped in the middle-income bracket, and the one that does not even have the opportunity to graduate to middle-income status (the “Poor Turkey”). Being stuck in a poverty trap, the Poor Turkey includes 27 provinces, all of which suffer from low levels of education (the average period of education is less than five years; i.e., there is a high prevalence of drop outs from elementary school), a lack of investment in fixed capital and infrastructure, and social exclusion of its seasonal and low-skilled labor force.

Similar voices were also raised in a recent McKinsey Report on Mexico. Referring to Mexico as a “two-speed economy,” the report indicates that the country’s slow income growth in the past three decades—GDP per capita rose by just 0.6% per year on average and only 0.4% during 2013—is due to weak labor productivity, which fell from $18.30 per worker per hour (in purchasing power parity terms) in 1981 to $17.90 in 2012.

Accordingly, the report concludes:

Behind the productivity averages are two dramatically divergent trends: the productivity of large modern enterprises, many of which have become integrated into the global economy, has risen by 5.8 percent a year since 1999; in small traditional enterprises, productivity is falling by 6.5 percent a year. In between are mid-sized companies—a mix of traditional and modern establishments whose productivity growth has been close to flat at about 1.0 percent a year. Overall, the gains of modern companies have been all but offset by the decline in traditional ones, leaving economy-wide productivity growth at about 0.8 percent a year since 1990.

There is a modern Mexico, a high-speed, sophisticated economy with cutting-edge auto and aerospace factories, multinationals that compete in global markets, and universities that graduate more engineers than Germany. And there is traditional Mexico, a land of sub-scale, low-speed, technologically backward, unproductive enterprises, many of which operate outside the formal economy. It is precisely the deep division between the two economies that has kept Mexico’s growth at disappointingly low levels despite three decades of economic reforms. What makes this dichotomy important now is that the two Mexicos are pulling in opposite directions.

At the global scale, the United Nations defines the Least Developed Countries as those economies with less than $750 of per capita income. By this definition, LDCs include 1 billion of the people on our planet. This group includes 400 million people in sub-Saharan Africa and about 30% of the population of Latin America. Thus, “less development” became treated as synonymous with weak governments, weak markets, and weak institutions. An estimated 1 billion lack safe drinking water, 2.6 billion lack proper sanitization, and 1.5 billion do not have access to electricity. A 2010 report by the Institute of Development Studies found that 70% of the world’s poorest people live in middle-income countries, so tackling inequality is one of the most effective ways to accelerate progress towards eradicating poverty. The celebrated globalization of the international markets and the euphoria of “structural reform” over the last quarter of the 20th century has been accompanied by threats of a worldwide increase in environmental degradation, social exclusion, and economic inequality.

Personal and inter-regional inequality ought to be regarded as one of the key obstacles to sustained growth. Many development economists now recognize the fact that “business as usual” does not any work any more. This observation was in fact one of the key points of the Resolution Adopted by the UN General Assembly, over the United Nations Millennium Declaration (December 2000), stating that “the central challenge we face to day is to ensure that globalization becomes a positive force for all the world’s people. For while globalization offers great opportunities, at present its benefits are very unevenly shared, while its costs are unevenly distributed .… Developing countries and countries with economies in transition face special difficulties in responding to this central challenge. (Emphasis added.)

Furthermore, the recent spurt of growth under the so-called great moderation of the 2000s proved fragile under the speculative-led bubbles of the global economy. Together with the eruption of the global crisis in 2008 and the ensuing Great Recession, terms of employment suffered from continuous informalization as labor markets became more segmented and fragmented, and labor rights were severely restricted under conditions of flexibilization.

The International Labour Organization (ILO) estimates that the number of people in vulnerable employment reached 1.5 billion. (ILO defines vulnerable employment as “those small-scale producers who work for their own and unpaid family workers.”) This constitutes about half of global employment and has increased by 146 million from 1999 to the present. This type of informalized vulnerable labor includes 75.8% of employment in sub-Saharan Africa, 32.2% in Latin America, and 65.4% in the cheap-labor havens of East and South Asia. With additional pressures due to stratification by ethnic, religious, and other social statuses, this type of employment suffers deeply from informalization and open exploitation.

The ongoing global Great Recession is a testament that the ongoing Keynesian demand-driven growth patterns of the early 2010s are not sustainable over the long run. The IMF estimates reveal that the gap between the advanced economies and the global poor is likely to escalate over the rest of the 2010s. IMF estimates also suggest that the gap among the developing world is widening, that substantial global inequality remains, and that opportunities are not open to all. The 1.2 billion poorest people account for only 1% of the world consumption while the billion richest consume 72%.

Attaining reinvigorated development—breaking through the walls of the middle-income trap for middle-income developing countries and securing gains against the poverty trap in the poorest nations of the global economy—is an entirely new challenge that can not be tackled by a single set of policy recommendations. All of this calls for more policy space, and an open vision against the clichés or dogmas of “one-size-fits-all” recipes.

The concept of the “middle-income trap” had been brought into fashion by Barry Eichengreen and colleagues (see their recent NBER Working Paper). The concept is used to describe the challenges, for countries with GDP per capita of around $16,000 (at 2005 prices), in achieving productivity growth and key institutional transformations.

Many economists have taken note of the fact that, as economies converge to this middle-income level, “easily-accessible” sources of growth based on the transfer of virtually unlimited supplies of labor from rural agriculture to urban centers and towards capital-investment-led high profit sectors gradually lose their stimulating impact. Technologies grow mature and finally become worn out. After this threshold is reached, sources of growth must be derived from technological and institutional advances and productivity gains, which can only be achieved by investments in human capital, research and development (R&D), and institutional reforms. This, however, is no easy task, and countries often get “trapped” at this stage of development, hence the middle-income trap.

Yet, as such, the middle-income trap is an average concept defined by national boundaries. Recent work reveals, however, that divergences persist, and often times are reinforced, between regions embedded within national economies and even within municipalities. In many instances, poverty-stricken regions co-exist side by side with rich and highly productive regions. The persistent co-existence of such divergent structures leads us to ask whether poverty is in fact being reproduced by the workings of the market mechanism favoring high-income regions. This observation has its roots in a long tradition in development economics of duality and dependency theories.

My recent study with several colleagues (Yeldan, et.al. (2013)) recognizes, for instance, that Turkey reached middle-income status in 1955 and has remained there for an excessively long period. In the fifty years through 2005, Turkey only graduated to the high middle-income status. Yet Yeldan et.al. ask “which Turkey?” and report that Turkish overall gross domestic product is in fact divided into three sub-divisions by income brackets:

With a regional income of $376 billion, exceeding those of European economies such as Norway and Switzerland, the high-income Turkey led by Istanbul and Ankara gives the impression of relatively powerful dynamics for escaping the middle-income trap. This sub-division hosts Turkey’s administrative, political, commercial and financial power centers and yet its links with the rest of Turkey are weakening gradually.

Apart from the “high-income Turkey,” there are two more sub-divisions: the one which is exposed to the danger of being trapped in the middle-income bracket, and the one that does not even have the opportunity to graduate to middle-income status (the “Poor Turkey”). Being stuck in a poverty trap, the Poor Turkey includes 27 provinces, all of which suffer from low levels of education (the average period of education is less than five years; i.e., there is a high prevalence of drop outs from elementary school), a lack of investment in fixed capital and infrastructure, and social exclusion of its seasonal and low-skilled labor force.

Similar voices were also raised in a recent McKinsey Report on Mexico. Referring to Mexico as a “two-speed economy,” the report indicates that the country’s slow income growth in the past three decades—GDP per capita rose by just 0.6% per year on average and only 0.4% during 2013—is due to weak labor productivity, which fell from $18.30 per worker per hour (in purchasing power parity terms) in 1981 to $17.90 in 2012.

Accordingly, the report concludes:

Behind the productivity averages are two dramatically divergent trends: the productivity of large modern enterprises, many of which have become integrated into the global economy, has risen by 5.8 percent a year since 1999; in small traditional enterprises, productivity is falling by 6.5 percent a year. In between are mid-sized companies—a mix of traditional and modern establishments whose productivity growth has been close to flat at about 1.0 percent a year. Overall, the gains of modern companies have been all but offset by the decline in traditional ones, leaving economy-wide productivity growth at about 0.8 percent a year since 1990.

There is a modern Mexico, a high-speed, sophisticated economy with cutting-edge auto and aerospace factories, multinationals that compete in global markets, and universities that graduate more engineers than Germany. And there is traditional Mexico, a land of sub-scale, low-speed, technologically backward, unproductive enterprises, many of which operate outside the formal economy. It is precisely the deep division between the two economies that has kept Mexico’s growth at disappointingly low levels despite three decades of economic reforms. What makes this dichotomy important now is that the two Mexicos are pulling in opposite directions.

At the global scale, the United Nations defines the Least Developed Countries as those economies with less than $750 of per capita income. By this definition, LDCs include 1 billion of the people on our planet. This group includes 400 million people in sub-Saharan Africa and about 30% of the population of Latin America. Thus, “less development” became treated as synonymous with weak governments, weak markets, and weak institutions. An estimated 1 billion lack safe drinking water, 2.6 billion lack proper sanitization, and 1.5 billion do not have access to electricity. A 2010 report by the Institute of Development Studies found that 70% of the world’s poorest people live in middle-income countries, so tackling inequality is one of the most effective ways to accelerate progress towards eradicating poverty. The celebrated globalization of the international markets and the euphoria of “structural reform” over the last quarter of the 20th century has been accompanied by threats of a worldwide increase in environmental degradation, social exclusion, and economic inequality.

Personal and inter-regional inequality ought to be regarded as one of the key obstacles to sustained growth. Many development economists now recognize the fact that “business as usual” does not any work any more. This observation was in fact one of the key points of the Resolution Adopted by the UN General Assembly, over the United Nations Millennium Declaration (December 2000), stating that “the central challenge we face to day is to ensure that globalization becomes a positive force for all the world’s people. For while globalization offers great opportunities, at present its benefits are very unevenly shared, while its costs are unevenly distributed .… Developing countries and countries with economies in transition face special difficulties in responding to this central challenge. (Emphasis added.)

Furthermore, the recent spurt of growth under the so-called great moderation of the 2000s proved fragile under the speculative-led bubbles of the global economy. Together with the eruption of the global crisis in 2008 and the ensuing Great Recession, terms of employment suffered from continuous informalization as labor markets became more segmented and fragmented, and labor rights were severely restricted under conditions of flexibilization.

The International Labour Organization (ILO) estimates that the number of people in vulnerable employment reached 1.5 billion. (ILO defines vulnerable employment as “those small-scale producers who work for their own and unpaid family workers.”) This constitutes about half of global employment and has increased by 146 million from 1999 to the present. This type of informalized vulnerable labor includes 75.8% of employment in sub-Saharan Africa, 32.2% in Latin America, and 65.4% in the cheap-labor havens of East and South Asia. With additional pressures due to stratification by ethnic, religious, and other social statuses, this type of employment suffers deeply from informalization and open exploitation.

The ongoing global Great Recession is a testament that the ongoing Keynesian demand-driven growth patterns of the early 2010s are not sustainable over the long run. The IMF estimates reveal that the gap between the advanced economies and the global poor is likely to escalate over the rest of the 2010s. IMF estimates also suggest that the gap among the developing world is widening, that substantial global inequality remains, and that opportunities are not open to all. The 1.2 billion poorest people account for only 1% of the world consumption while the billion richest consume 72%.

Attaining reinvigorated development—breaking through the walls of the middle-income trap for middle-income developing countries and securing gains against the poverty trap in the poorest nations of the global economy—is an entirely new challenge that can not be tackled by a single set of policy recommendations. All of this calls for more policy space, and an open vision against the clichés or dogmas of “one-size-fits-all” recipes.